The Rt Hon Margaret Hodge MP, Chair of the Committee of Public Accounts, today said:

"The Work Programme is absolutely crucial for helping people, especially the most vulnerable, get into and stay in work.

"However its performance so far has been extremely poor.

"The first set of data on job outcomes shows that between June 2011 and July 2012, only 3.6% of people referred to the Work Programme moved off benefit and into work, less than a third of the target of 11.9%.

"In fact, performance was so poor that it was actually worse than the Department’s own expectations of the number of people who would have found work if the Programme didn’t exist.

"None of the providers managed to meet their minimum performance targets. The best performing provider only moved 5% of people off benefit and into work, while the worst managed just 2%.

"The Programme is particularly failing young people and the hardest-to-help.

"It is shocking that of the 9,500 former incapacity benefit claimants referred to providers, only 20 people have been placed in a job that has lasted three months, while the poorest performing provider did not manage to place a single person in the under 25 category into a job lasting six months.

"The Department must hold failing providers to account, as well as ensuring that good practice is identified and shared.

"Under the payment by results system, the Department has incentives in place which in theory are supposed to prevent providers concentrating on the easiest cases and ignoring those who are hardest to help. But these incentives are not working and there is increasing evidence of ‘creaming and parking’.

"A provider that continues to underperform could become financially unsustainable. The Department must identify cases where a provider is at risk of failing and ensure there are specific plans in place to deal with this.

"When the Department eventually published the first lot of performance data, 18 months into the Programme, it lacked context or explanation and was four months later than promised.

"The Department did, however, published unvalidated data from a trade body representing the providers. This is just not on. In future we expect data to be published in a much timelier manner, with a proper explanation if performance falls short."

Margaret Hodge was speaking as the Committee published its 33rd Report of this Session which, on the basis of evidence from the Department for Work and Pensions, examined the performance of the Work Programme.

The Work Programme was introduced in June 2011 to help long term unemployed people move off benefits and into sustained employment. It is estimated to cost between £3 billion and £5 billion over five years. In November 2012, the Department for Work and Pensions (the Department) published its first set of data on the Work Programme’s performance. Our report considers the performance to date and builds on our earlier report, in May 2012, on the Work Programme’s design and early implementation.

The Work Programme’s performance for its first 14 months of operation—from June 2011 to July 2012—fell well short of the Department’s expectations. Overall, only 3.6% of claimants on the Programme moved off benefit and into sustained employment, less than a third of the 11.9% the Department expected to achieve, and well below the Department’s own estimate of what would have happened if there had been no Work Programme running at all. The Department had said that 9.2% of the largest group of participants would have moved off benefits and into work with no intervention at all.

Individual Work Programme providers’ performance in helping claimants into employment varies widely, but not one of the 18 providers has met their contractual targets. The Department does not consider that current labour market conditions are the reason for the Programme’s under-performance. The Department attributes the differences in performance between providers to their different approaches and different levels of competence. The Department must do all it can to examine which approaches are working best and which are not working. Good practice should be identified and shared, but failing providers should be held to proper account.

The difference between actual and expected performance is greatest for those claimants considered the hardest to help, including in particular claimants with disabilities. The Department’s own evaluation suggests that these claimants have been receiving a poor service from providers. Creaming and parking are clear policy concerns which we share with the Department. Despite assurances that it would do so, the Department has not provided the further analysis which would demonstrate whether or not creaming and parking was taking place.

Given the poor performance across providers, there is a high risk that one or more will fail—either they will go out of business or the Department will cancel their contracts. Recognising that some providers might fail, the Department told us that it has processes to manage the impact on claimants should this happen. The Department will need to keep a close eye on which providers are most likely to fail and must manage all consequential risks.

We are concerned about the Department’s approach to publishing performance statistics. In publishing its data the Department did not make clear what level of performance it had been expected or say why performance was lower than planned. Yet it did publish unvalidated information on performance produced by a trade body.